Business Context and Reporting Period
This Form 6-K filing by International Game Technology PLC (IGT) covers the month of May 2020. The filing details amendments to the Company's Senior Facilities Agreement (Revolving Credit Facilities) and Senior Facility Agreement (Term Loan Facility) entered into on May 7 and May 8, 2020, respectively. These amendments were announced on May 13, 2020, to address financial covenant compliance and operational risks associated with the COVID-19 pandemic.
Key Financial Metrics and Debt Structure
The filing outlines the Company's existing debt facilities and new liquidity requirements:
- Revolving Credit Facilities (RCF): $1.05 billion and €625 million multicurrency facilities.
- Term Loan Facility (TLF): €1.5 billion facility.
- Liquidity Covenant: The Company is obligated to maintain "Liquidity" of at least $500 million through August 31, 2021. Testing frequency increases to monthly if liquidity falls below $750 million.
- Interest Margins: Margins on outstanding loans as of April 11, 2020, were increased to 2.475% for the RCF and 2.50% for the TLF. Margins increase to 3.25% if public debt ratings fall to B+ or B1 (or lower).
The filing does not provide specific values for revenue, profit, cash flow, or current debt balances.
Material Changes and Covenant Adjustments
The amendments introduce significant changes to financial covenants and operational restrictions:
- Covenant Waivers: Waivers granted for the minimum EBITDA to net interest costs ratio and maximum total net debt to EBITDA ratio for fiscal quarters ending June 30, 2020, through June 30, 2021. New thresholds apply starting September 30, 2021.
- COVID-19 Relief: A "Relief Period" from January 20, 2020, to August 31, 2021, excludes COVID-19-related material adverse effects and business suspensions from constituting events of default.
- Collateral Waiver: The obligation to grant security over additional collateral is waived, provided public debt ratings remain at BB- or Ba3 or higher.
- Restricted Payments: Dividends and share repurchases are prohibited from April 1, 2020, through June 30, 2021. They may resume thereafter subject to debt-to-EBITDA thresholds.
- Acquisition Cap: Maximum annual spending on acquisitions is reduced to $100 million during the Relief Period.
Outlook, Risks, and Management Commentary
The amendments reflect management's proactive approach to mitigating risks posed by the COVID-19 pandemic. By securing waivers on leverage and interest coverage covenants and defining a specific relief period for pandemic-related disruptions, the Company aims to maintain financial flexibility. The increased interest margins and liquidity requirements indicate a heightened focus on cash preservation and risk management during the economic uncertainty.
Investor Verification Checklist
- Verify the Company's current public debt ratings to confirm if the 3.25% margin increase applies.
- Monitor quarterly and monthly liquidity reports to ensure compliance with the $500 million minimum liquidity threshold.
- Review the specific new EBITDA and debt-to-EBITDA thresholds effective September 30, 2021, as detailed in the full amendment documents.
- Assess the impact of the $100 million acquisition cap on the Company's strategic growth plans.
- Confirm the status of the "Relief Period" expiration date (August 31, 2021) and potential extensions.